Charitable giving does not only serves a sense of personal satisfaction as a result of helping others, but it can also improve your finances because of the tax breaks and additional opportunities that generosity can lead to.
With tax time right around the corner, it is common for people to spend the next month or two getting all of their files in order from W-2’s and 1099’s to daycare, tuition, and medical receipts. While the former increase the amount of taxes one may pay, the latter counteract them to lead to a larger return.
How does this work?
The way this works is that the government recognizes through the tax code that there are certain necessary expenses in life, such as childcare for working parents and the costs of seeing a doctor, and that with these expenses one’s income is taken from and unable to be used in any other manner. The result of this is that these costs are deducted from what was made in the year.
For example, if you make $40,000, but paid $5,000 in daycare and medical costs, then you will only owe taxes on $35,000. The result for those who have money taken from their paychecks is that the taxes on this $5,000 will be refunded.
The same practice applies to charitable giving. While giving is not a necessary expense, the government recognizes the value of non-profit organizations that provide shelter and food for the needy, as well as those that offer reduced cost healthcare, education, and free toys at Christmas (such as the US Marine Corps’ Toys for Tots program).
If the above person making $40,000 gave 10% of her income to charity and had daycare and medical costs of $5,000 for the year, then she would only be taxed on $31,000. At a rate of 25%, she would receive a refund of $2,250 on these items alone!
Beyond the immediate results of a larger tax return, being involved in local non-profit organization can also lead to opportunities that will enrich you both personally and financially.
Giving can Lead to Other Opportunities
There is an old saying: “you can’t receive a gift with a closed fist.” Being stingy will close one off from great opportunities that are out there, possibly even in your own backyard. The reason for this is because those who are generous with their time like to be around others who also value giving.
This is the reason little league teams celebrate the end of their season at the restaurant that sponsors their season. It is also the reason the families of those players return to have dinner there on a regular basis. Not only is their child’s photo on the wall, but they also associate the business with a positive experience.
Outside of bringing money into one’s life, there are other opportunities that come along as a result of being charitable. The greatest example of this is that of “Dave.” Dave had just filed personal bankruptcy when his business failed and his home was foreclosed on as a result of it.
He moved in with his sister temporarily and was feeling especially down on himself. That Thanksgiving, Dave decided to continue a tradition he had started a few years before by volunteering at a soup kitchen to serve dinner to those in need. He ended up meeting the woman who became his wife and they have now been married eight years and recently purchased a home together.
“Joe” is a talented finish carpenter, but had trouble getting regular jobs, so he often worked with a crew from a larger contractor. While he was working one Sunday, his wife, “Kathy,” was volunteering in the daycare for her local church. It was there that she overheard one of the church members saying that she wanted to add a room to her home.
Kathy mentioned that her husband was a very talented carpenter and that while he was extremely busy, he would likely make room for a member of the church. Joe got the job and it led to him building a deck for that person’s neighbor. Afterwards, he treated his wife to a day at a spa for the great work she did.
Being generous is good for us. It helps us lead by example and also allows us to take the focus off of ourselves and place it onto those who need more than us.
The benefits of giving are many. Beyond the satisfaction of helping others, we also find that we are helping ourselves. Giving money leads to larger tax returns and giving time leads to opportunities that are not available when we shut ourselves off to the world. After all, it’s hard to put money into a closed fist.
This was a Guest Post by Brenda Panin. Brenda is currently a web content writer for Prize Homes Australia. In her free times she likes to write about social media and new marketing strategies.